Whistleblowers and Qui Tam Lawsuits

March 31, 2017

Former Whistleblower Denied Portion of Government Settlement

Vinod Khurana alleged he should receive part of a $500 million settlement agreement between Science Applications International Corp. (SAIC), New York City, and the Southern District U.S. Attorney’s Office since he was a whistleblower who informed the government of SAIC’s fraudulent billing and record-keeping system. However, the court denied this claim stating that Khurana was not a valid qui tam relator in relation to the settlement. Therefore, he had no right to a portion of the agreement as if it were the government’s alternate remedy.

Khurana’s History with SAIC

Khurana was a software engineer with Spherion, a quality assurance company that was hired to review SAIC’s records and billing on the CityTime system, which was used to track municipal workers’ hours. By working with CityTime, Khurana discovered that SAIC managers had a fraudulent billing and record-keeping system that made them money. He claims his bringing forward information about this fraud between 2004 and 2007 was what led to his dismissal in 2007.

March 24, 2017

DOJ Investigating How Much Large Health Insurers Charge Medicaid

by Gregory J. Brod

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Based on documents from a qui tam lawsuit filed against numerous health insurance companies, it is clear that the U.S. Department of Justice is looking into allegations that major health insurers in the U.S. are overcharging Medicare. These insurers include UnitedHealth Group Inc., Health Net Inc., Aetna Inc., and Bravo Health Inc., which is part of Cigna Corp. You may recognize these as some of the largest insurance providers in the country. The U.S. has agreed to join the qui tam suit against UnitedHealth and declined to intervene in cases against the other insurers. However, the government has stated it will continue its investigation into the allegations against these other insurers separately.

The Beginning of this Qui Tam Action

The qui tam action based on the False Claims Act was filed by Benjamin Poehling in 2011. Poehling was previously an executive at UnitedHealth and alleges that major health insurers overstate how sick Medicare patients are to increase reimbursements by millions of dollars. Through the program known as risk adjustment or risk scoring, healthcare providers would state that numerous Medicare patients under Part C and Part C programs were treated for conditions they did not have or had, yet were not treated for – also known as upcoding. These particularly costly conditions that were coded increased a provider’s risk score and in turn, raised reimbursements from the government.

March 17, 2017

Federal Whistleblower Laws May Preempt Attorney-Client Privilege

by Gregory J. Brod

file9391313432751-225x300 There was an unexpected outcome in the unique case of Wadler v. Bio-Rad Laboratories, Inc., et al., when a federal judge in the Northern District of California ruled the Sarbanes-Oxley and Dodd-Frank Acts’ whistleblower protections preempted attorney-client privilege. This ruling allowed Sanford Wadler, the former general counsel of Bio-Rad Laboratories, Inc., to bring file a whistleblower action against his previous employer, take the case through trial, and receive compensatory and punitive damages.

Wadler v. Bio-Rad Laboratories, Inc., et al.

In 2015, Wadler brought a lawsuit against Bio-Rad for firing him in retaliation for investigating potential violations of the Foreign Corrupt Practices Act (FCPA) in China and taking his concerns to the company’s audit committee. These concerns arose after the company’s officers learned in 2009 that there were FCPA violations in Vietnam, Thailand, and Russia. The company determined that it needed to investigate whether similar violations occurred in China. An outside law firm determined there was no evidence of FCPA violations in China. However, Wadler believed this was not actually the case and continued to look into these issues, even going to the company’s audit committee about them.

March 10, 2017

Whistleblowers Can Gather Confidential Company Documents

by Gregory J. Brod

bob-brents-182206-300x240 The U.S. District Court of the Southern District of California granted whistleblowers a significant victory this year. In the case of Erhart v. BofI Holdings, Inc., the district court found an employee’s confidentiality agreement with his or her employer did not trump federal whistleblower’s rights. In some circumstances, employees can gather confidential documentation as evidence of fraud, despite signing a confidentiality agreement. Additionally, any retaliatory actions by the company against the whistleblower in relation to these confidential documents is unlikely to succeed.

Erhart v. BofI Holdings, Inc.

Charles Matthew Erhart was an internal auditor for BofI Federal Bank. After being let go, he brought suit against BofI under the Sarbanes-Oxley Act and other whistleblower laws based on the company committing fraud against the government and retaliating for his bringing evidence forward. He stated he was fired because he disclosed the bank’s federal and state law violations to federal regulators.

March 3, 2017

Recent Qui Tam Decisions Around the U.S.

by Gregory J. Brod

Each week new qui tam suits, possible under the False Claims Act (FCA) are brought by private individuals against other individuals and businesses on behalf of the federal government. Many of these lawsuits take years to investigate and litigate. Additionally, each week sees some of these cases settled, finalized, or appealed. Here are a few cases that wrapped up this past week:

In February, a physician’s practice in Florida agreed to settle a FCA claim based on Medicare fraud for $750,000. The qui tam suit against Dr. Paul B. Tartell was filed by a former patient Theodore Duay. Duay alleged that Tartell would bill Medicare and the Federal Employee Health Benefits Program for procedures that were not medically necessary or not performed at all. Numerous federal agencies were involved in negotiating this settlement, and Duay will receive $135,000 for filing the action.
TeamHealth Holdings will pay $60 million plus interest due to allegations its business, IPC Healthcare Inc., committed fraud against Medicare, Medicaid, the Defense Health Agency, and the Federal Employees Health Benefits Program by billing for more expensive medical services than what were actually provided. Dr. Bijan Oughatiyan filed a qui tam action under the FCA alleging the practice of “upcoding.” The federal government investigated and chose to intervene, providing a detailed description of how IPC Healthcare used false codes to receive greater reimbursements. Oughatiyan will receive $11.4 million for his participation.

February 24, 2017

Federal Court Finds Qui Tam Claimants Cannot Seal Agreement to Share Settlement

by Gregory J. Brod

drew-hays-206414-200x300 In the case of Fair Laboratory Practices Associates v. Riedel, the U.S. Court of Appeals for the 3rd Circuit determined that a qui tam settlement sharing agreement between two claimants did not need to be placed under seal. This is important information for claimants who want to make private agreements to split the proceeds of qui tam cases against the same defendants.

If you are involved in a qui tam lawsuit or believe you have the evidence to bring one, yet you know there are also similar actions in process against the same person, contact an experienced California qui tam attorney from Brod Law Firm right away.

Fair Laboratory Practices Associates v. Riedel

February 17, 2017

If You Voluntarily Dismiss Your Qui Tam Suit, You Cannot Benefit From a Later Settlement

by Gregory J. Brod

This February, a federal district judge from the Southern District of New York, part of the Second Circuit Court of Appeals, determined a whistleblower who voluntarily dismissed his False Claims Act (FCA) case against L-3 Communications EOTech Inc. in 2014 could not share in a settlement later reached between L-3 Communications and the federal government in 2015. While this ruling may not be law across the U.S., it is an important opinion for potential qui tam plaintiffs to consider since other federal judges would likely come to the same conclusions. Ultimately, whistleblowers will need to see the entire case through to benefit from a settlement or judgment in the government’s favor.

The L-3 Communications Case

The whistleblower against L-3 Communications was a quality control engineer for the company from May to June 2013. In August 2013, he stated that the company sold defective holographic firearm sights to the American military and law enforcement agencies. The sights were supposed to work in temperatures from negative 40 degrees to 140 degrees Fahrenheit and with humidity. However, they were allegedly defective because they were inaccurate in extreme hot and cold temperatures and humid conditions.

February 3, 2017

Defining “Person” Under the False Claims Act

by Gregory J. Brod

The False Claims Act is a crucial tool for the government to be able to recover fraudulently obtained or retained funds. Under the FCA, the federal government, or private citizens on its behalf, can bring lawsuits against individuals or certain entities that have made a false or fraudulent claim, resulting in that individual or entity wrongfully obtaining or keeping money from the government. Fraudulent claims are often made in relation to health care programs like Medicare and Medicaid so that individuals or entities receive greater disbursements than they deserve. Under the FCA, the individuals who can be held liable for false claims are “any person.” However, the federal courts have been left to define who counts as a person and who does not.

U.S. ex rel. Brinkley v. University of Louisville

In January, the U.S. District Court of the Western District of Kentucky in the case U.S. ex rel. Brinkley v. University of Louisville had to answer the question of whether a party accused of making a false claim was a person. This federal court is neither the first to do so, nor will it be the last. The plaintiffs in this case filed a qui tam action as private citizens on behalf of the federal government against the University of Louisville, two of the university’s foundations, and eight university researchers. The court found based on previous federal decisions that a state university cannot be held liable under the FCA because it is not a person. No state agencies or entities that can be considered arms of the state are people under the FCA.

January 27, 2017

SCOTUS Rules Seal Violation Does Not Cause Automatic Dismissal of Qui Tam Case

by Gregory J. Brod

In December 2016, the U.S. Supreme Court determined in State Farm Fire & Casualty Co. v. United States ex rel. Rigsby that a violation of the False Claims Act (FCA) seal requirement does not require an automatic dismissal of the case. This is good news for whistleblowers and the U.S. government who use suits under the FCA to recover money fraudulently stolen or kept from the government.

The Seal Requirement

Under the FCA, private citizens can file what is known as a qui tam action under the FCA on behalf of the U.S. government. These individuals are commonly known as whistleblowers but are called “relators” under the law. Once the relator has begun the action, the government has time to investigate the issues and decide whether or not to intervene. If the federal government intervenes, it is a party to the suit. If it chooses not to intervene, the relator can move forward with the suit, but the government is only a party of interest.

January 9, 2017

DOJ Recovers a Record Amount under False Claim Act and Qui Tam Cases

by Gregory J. Brod

Between Oct. 2015 and Sept. 2016, the Department of Justice (DOJ) won more than $4.7 billion in judgements and settlements from civil fraud and false claims against the government, a DOJ press release stated. This recovery is from cases brought under the False Claims Act (FCA), including qui tam claims in which a whistleblower brings to light a fraud being perpetrated against the government. The amount is particularly important to note since it is the third highest recovery for a fiscal year since the FCA was enacted. It is also crucial in the sense that it confirms the effectiveness of qui tam cases and other claims brought under the FCA. The legal protections and incentives for whistleblowers to come forward enables the government to stop fraudulent schemes and return funds back to programs that support low-income families, veterans, and the elderly.

Fraud is Common within the Health Care Industry

Fraudulent claims within the health care industry cost the government billions of dollars. The DOJ reported $2.5 billion was recovered for the federal government in relation to this sector from hospitals, physicians, nursing homes, labs, medical device companies, and drug companies during the 2016 fiscal year. Additionally, a total of $19.3 billion has been won in health care fraud claims since January 2009. The recovered funds go back to federally funded medical programs such as Medicare, Medicaid, and TRICARE.